20.11.13

MPR Decoder: Transportation Funding Forum

MPR recently aired a forum they taped of the state's most highfalutin' powers-that-be when it comes to transportation funding. It included Met Council chair Sue Haigh (SH), former Met Council chair (and token Republican) Peter Bell (PB), MNDOT head Charles Zelle (CZ), and it was moderated by the ubiquitous Larry Jacobs (LJ).

Because all of these people are importnat, and because you can start to get a sense of thier priorities by listening to them talk about the future of Minnesota transportation, I typed out a rough transcript of the conversation for your edification.

MPR Host: One of the biggest issues we face is transportation. How can people get where they need to go? How do we pay for roads and bridges? [introduces guests]

SH: I’m excited that more people are understanding transit is critical to economic growth as a region. It’s about how we operate and build out a system for the future. We’re focused on operations and smart efficient operations, but also how we make that investment for the next 30 40 50 70 years. It’s that dichotomy between investing in the day to day and in building out that system for the future. [talks about governor Dayton’s blue ribbon transportation committee that pretty much failed because the state DFL powers didn’t actually follow through on their good ideas]. The findings are really important. Regions with robust transit systems work better and are the choice destinations for employers and employees. Uncertainty about investment is what keeps the market from investing in economic growth and prosperity. We must remain competitive. ["Competitive" is everyone's favorite word.]

Our metro region is the 13th largest metro economy in the US. How the region goes is how the state goes. [I.e. rural legislators, chill out.] Making investments in the region is good for the whole state. Transportation and transit can’t be separated. Buses run on roads. The most important investments for roads are the HOV lanes, MNPASS lanes. So we work very closely with MNDOT all the time in planning our future. When I think about transit and we think about where we wanna go we’re making decisions today for the rest of the century. Must be courageous and bold. Where is growth going to be? In the next 30 years, we’re gonna have 800K more people in the region. [So they say.] We have to plan for it, it's changing dramatically.

There will be 2X more seniors, and far more diverse. 43% of the people who live in the region will be people of color. 2/3 of the new households won’t have kids under 18. This is beginning to drive demand in the marketplace for housing changes. [Absolutely, long overdue too.] Our ability to grow as a region is so critical to the success of our state. We hear from employers that increasingly people are making a choice about where to live, [as opposed to what? I am still skeptical that people move around the country based on culture as Richard Florida would have us believe] and that’s where they’ll go work (v. the other way around). This is a fundamental millenial shift. We know that millenials are not in love with the car. Like with my parent’s or my generation growing up, getting a drivers license at 16 was a big deal. Now, not so much. There’s a decrease in the percentage of millenails who have a drivers license today, only 80%. And that’s because it’s great to be on transit. You are gonna be logged on, linked in, extending your social day and your business day. We have to be smart about that today as we plan for the future.

What happens if we do nothing? We’ll barely be able to maintain what we have today. The task we have in front of us is, how do we pay for this? [With money, borrowed.]

The governor last session said the smart way to pay for this we currently have a quarter cent sales tax in the region, and the Governor proposed expanding to a seven county half cent sales tax. This is what our competitor regions do. They’re going to the sales tax. We are very far behind where that investment is compared to our competitor regions. [Competition!]

The Itasca project, a CEO-led business alliance, thinks transportation is very important. They did an ROI, and said there’s actually a 6-10B return by the year 2040 as we build out this transit system. We would be making a 4.4B investment to build out the transitways. [I like the way people talk about the Itasca project as if it was a either an Illuminati-style secret society or the Manhattan project, also a secret society.]

The study looked at hard data about vehicle operation costs, travel time, logistics, emissions, safety, road maintenance. And they looked at the indirect savings too, not in that 6-10B number. If we invest in this, we will provide more access to more jobs. So we need to keep up with our regional competitors. Denver, Phoenix, Dallas, Houston, Seattle. [Must we compete with Phoenix?] What it means to be able to be attractive to the next generation of works, transit is a really important part of that equation.

I just visited Phoenix, Seattle, and Denver. It's really interesting what they’ve done in Denver. 10 years ago they didn’t have transit. In the last 5-10 years, they’re on track to build out 5 major transitway investments. In the TC we have the blue line, and by the middle of next year we’ll have the green line. We’ll have 2 and that’s great, but if we compare where we are with Denver, we wanna be that region too. Part of that investment is thinking about how we compete against other regions.

The critical point to consider is that when people get on a bus or train, they’re going to work or school. 80%. So the idea of investing in transit is really investing in that economic growth and prosperity. Since 2003 when the Blue Line opened, we have had 15,000 housing units built along that line. The Green Line isn’t opening until next year, but we’ve had $1.7B in permits pulled for housing units along the central corridor. When the market knows where the investment is going to be, the market is attracted to come there for economic growth. We need to create a revenue stream that supports the system to be attractive for growth and prosperity. 40000 riders are going to ride the green line next year, really important to the U of MN. We know the data shows us, and we have to marshal the political courage to move forward to make this investment. I look forward to working with Commissioner Zelle to work together on transit and roads. [Or, in MNDOT's case, almost all roads.]

PB: Transportation is one of the very few spaces in our political discourse where there is a shot of coming to common ground. Everyone agrees we need government to do transportation. [Actually, I'd bet there are some wackos who would disagree...]

Said that, I have some concerns. One is that for transit only 5% of the public uses transit. [If that.] There are no estimates that I see... 7 or 8% would be wildly optimistic. In terms of it's impact to move the needle of congestion – which is the public's concern... they wanna go as cheaply and quickly as possible, and all the other things they could care less about, [I'm not quite willing to go that far, Peter. There are other things we care about, like what is our experience like. For example, do we have to sit on sharp spikes?] we should never take our eye off that dot. While I’m a strong supporter of transportation, we can’t delude ourselves that building more transit systems is gonna create a day-to-night solution. [I mean, he's right of course. Things don't change overnight. But this kind of attitude is frustrating. Haven't we built enough roads by now?]

Second point, from my POV about 20 years ago the Gov't stopped funding programs and started funding strategic investments. One of the things I learned as Met Council chair is that everybody, literally everybody, who goes to the legislature doesn’t ask for people to spend money, but to make investments that will pay for themselves. I mean, everybody says that. higher education, affordable housing, chemical dependency, job trainings, WIC program, our national health insurance, sports stadiums, transportation and transit says that. That’s just the beginning of the list. It goes on forever. But the accumulative total of all those expenditures is a little bit of smoke and mirrors and hard to nail down. [Aw heck. I kinda like Peter Bell.]

Why is that the case?

Because of the intervening variables that impact that. What impacts job creation in the Twin Cities in my mind are interest rates, the education of the population, tax rates, the regulatory environment, crime, and foreign competition, to name a few. Those powerful intervening variables make it impossible to say if this transit line is building our economy by 1 percent. What the fed is going to do with interest rates overwhelms all of that. What china is doing with its currently overwhelms all of that… But when we try to quantify or oversell, we get into trouble, because the major problem in America today is cynicism. [Yeah, and whose fault is that?] I'm reminded by the Lily Tomlin line, "No matter how cynical I become, it's never enough to keep up." [A Lily Tomlin quote? Be still my beating heart!] The public feels that elected officials over promise and under produce, constantly.

Again I’m on board with these investments, but to say they’re going to pay a return on investment is very difficult and somewhat squishy. [Yup. See today's Streets.mn post.]

More points on transit. The indispensable co-ingredient is density. You can’t talk about transit unless you talk about density. The 40,000 people riding the Central Corridor [I like how he still calls it this, instead of the "green line" like Sue Haigh] every day have to live in close proximity to use that system. What did I learn at the Met Council? I learn people have very different and strong feelings about density. That’s a co-ingredient about transit. We have to continue to discuss our regional view, the plusses, some of the minuses that people don’t like about density, and address those issues.

More points, modestly provocative. It was a mistake for the FTA to move away from the CEI to the more fluid CEI. The Feds now allow more subjectivity to come into the transit funding. That benefited us. We could build 3 infill stations on the central corridor. That was my mistake. [It's a rare quality to admit one's mistakes.] I didn’t realize soon enough we should have built those 3 stations from the start. The community was right. We hid behind the CEI to do that. The difficulty of having a more flexible CEI is that the queue is going to grow very rapidly and very large, and I will take a bet on any amount that the available transit dollars won’t grow as fast as the queue because of having a more flexible CEI. Many embrace it, including economic development or impact of housing, subjective things we can’t quantify with precision. And others in the country will do the same thing and it won’t be as good an expenditure of dollars as it was before.

Second point, we in the TC have to look hard and sober at the amount of community input we have, and whether it should be allowed to morph into a community veto. The SWLRT battles... While I supported the 3 infill stations and that came from community input, we did some things on the CCLRT especially with the U of MN that we didn’t have to do. [Right on: see my oldposts about it.] We spent more money because of the pressure they brought to bear. I suspect the same thing will happen with the SWLRT. We’ll spend more money than we need to because of community input. [Yup. That's about right.] That’s happening nation wide. We are allowing communities to hold hostage programs. We really need to look hard at how we thing about that. we don’t need to eliminate it, but it needs a little bit of tweaking. Right now, it is out of balance.

Third point, there’s gonna be 2 potential casualties to the increased cost of SWLRT. Bottineau blvd is gonna be hurt. If you think Dakota or Washington counties are gonna fund Bottineau in my lifetime are gonna spend more money after spending so much on SWLRT, that’s wrong. Getting them to join CTIB is gonna be more difficult. [This is an important point, that nobody seems to be talking about. I.e. it's the opposite of the Strib's vague extortion threat-y Op-Ed from the other day.]

There are 5 reasons why people choose where to live. Cost of housing, tax structure, schools, safety, commute time. [Neighborhood has nothing to do with it? Walkability has nothing to do with it? I don't wanna live in PB's world.] We need to be mindful of all of those. We need to spend more time and transit budget at looking at industry developing different start times at work, telecommute and work from home, that might help the congestion problem as much as anything else.

CZ: Pleasure to be here with my friends Sue and Peter. [Yeah I bet they hang out all the time and play pinochle.] I am gonna talk a bit more about roads and bridges. [Shocker.] Transportation is interconnected and multi-modal. Transit and roads, all part of this multi-modal vision. At MNDOT, we‘ve changed our vision. We don’t love roads and bridges because we like concrete and iron, [no we like them for the nice yellow stripes] we see them the foundation of our health, major safety issue, and our environment.

What do Minnesotans most care about? Most people agree that transportation is the foundation of what we most care about. Second, funding. We do not have adequate funding or all of our systems. Three, there is a business case for investment. There is a return on the whole system, not just transit, though I was involved in the Itasca project at transit system ROI. [ITASCA, I am a secret member of ITASCA. Don't tell anyone] I am gonna give a peek at our math for the direct benefits (vs. the squishy part) for that these investments mean to taxpayers.

First, the link of the entire system to the economy. I’ve been traveling the state, and visited with businesses. Manufacturers and others in greater Minnesota. When I tour the Hormel plant or the Polaris plant [DFL swing districts!], I get asked about “logistics." Getting their products in and out of the factories is the #1 concern they have. Not commenting on the tax policy or other issues that do swamp their future prospects, but when I meet at Hormel and look at their robot plant, and say "when you meet with your supply chain investors do you have a MNDOT engineer there at the meeting?" They say "we should."

I ask "What happens when there’s a snow event in Austin" [That's MNDOT speak for a big storm] and they close down, the direct cost is $7M for that 24 hour period. And the ripple effect is far greater. How much are we adding those numbers to the operation of our system? [God, talk about squishy, if we add billions of phantom MNDOT cost/savings each time it snows?] It should be practiced. How we’re prudent for our system. Are we helping our businesses for our prosperity? Thinking strategically? The population is changing, not just the metro but in greater Minnesota. Millieanals have lost the love affair with cars, they love their phones. Which is great. [Pats millenials on head.] But in greater Minnesota, we have older folks who want choice. Greater Minnesota transit is underfunded, and is a concern for people who want to stay in their homes. Bemidji, Virginia, even the suburbs. [DFL swing districts!]

Congestion, actually has an economic factor. [Yeah, not really though.] Its more than stress. Businesses trying to get through the metro look for ways around it because of congestion. Our system is big in Minnesota. Its larger than most states. 50% of our pavements are over 50 years old, 35% of our bridges are over 50 years old. We built a very robust transportation system around the country, and its aging, and we have to look at the cost of maintaining the system we have. [Let's make a "no new roads" pledge, then.]

It's not just roads. We have 135 airports in Minnesota. [Meanwhile, air travel is in decline.] Waterways. Bicycle and pedestrian isn’t just an urban issue. I hear about it in Brainerd, Thief River Falls... [DFL swing districts!] How people are living, liveablility is just as much passion in greater Minnesota as well.

Just the state’s roads and bridges represent 80% of our state assets. 80% of our assets are deteriorating. The credit rating of our state is much like a individual, they say have you fixed the roof. If you have deferred maintenance, the credit rating of our state is compromised. I’ve been traveling around with MN-GO, it has goals. Connecting regional corridors, St Cloud, Rochester, Duluth, Bemidji [DFL Swing districts!], how these markets connect with each other. Each community has a story, has a road. I agree with Chairman Bell, the whole notion of economic vibrancy and congestion is very relative. It can be subjective. Everyone is passionate about transportation, not just the metro.

I was on that committee [aka. secret society], it identified $50B, all modes as being in deficiency. Much of that is just to preserve the system we have. $12B for roads and bridges. $7B for what we have, 5B for new mobility [you say mobility, I say useless bypasses. Let's call the whole thing off...], new lanes and new bridges [to rural Wisconsin]. Think about the Metro, more general purpose lanes isn’t the answer. [Well I agree with him there...] We have such a low return for what the traffic can bear. That’s why we’re talking about Mn-pass lanes.

Federal funding, if we’re lucky it will remain the same. That’s the best case. There’s gonna be a backlog of projects. In my short time here, I disappoint people on a daily basis [yup], not just because of detours but because of projects we won’t fund. The land of earmarks has passed us [I wanna go to the Land of Earmarks. How do I get there?], and the formula fed role is gonna diminish. Every state is facing how states have to take the leadership, and provide a higher % of their infrastructure funding.

OK, ROI. I actually believe it. We did studies. [Oh. Well then...] 50 stakeholders and experts about roads, we find (and an outside consultant) determined that there’s a $2.5 benefit for every $1 invested in the state, about maintaining and upgrade deterioration. [OK, well if you hired a consultant, then it must be true.] I’m a simple bus guy. [I.e. I'm just a caveman...] You buy a bus, you have to maintain it and keep it. After 15 years, you have to buy a new bus. Roads are the same thing. You have to maintain it. We repave roads. Sooner or later, you have to replace the road. If you don’t the costs of deterioration become increasingly expensive. That’s the metric that’s pretty solid. we need to invest to save money in the future.

We have done more to be prudent with the dollars we have, within projects, more focus on high return investments.

LJ: What’s the best way to fund transportation?

CZ: It’s a menu. There’s not gonna be any one source that solves infrastructure funding. The gas tax is efficient, but a crumbled mechanism because it’s a fixed amount, that over time. It doesn’t follow the costs of inflation [Well, it could, if you indexed it] as salt and snow and construction rise, gas tax revenues stay the same or go down because of cars becoming more efficient or (in some areas) people are driving less.

DC used to loan money to the highway fund, but now its been going the other way. There was a gas tax during Clinton, but it was used for general funding. There’s not enough money in the trust fund. In MN we have registration and MVST, the main sources of funding. It you look at all possibilities, many states are looking at general sales tax, what is most politically feasible. Gas tax polls pretty low compared to other sources. [That's putting it mildly.]

LJ: What about congestion pricing? Or the VMT tax? Is the menu gonna remain old fashioned, golden oldies?

CZ: In Oregon and mileage based systems, it's efficient but politically very hard to start something new. [Well if it's hard, we shouldn't do it then.] Privacy concerns about tracking miles... But it's ultimately inevitably in our future that we have other funding mechanisms. Tolling is something that doesn’t work well in MN. Most states don’t have tolling. That we have MN-PASS is brilliant, but it provides revenue and helps use market forces to use our lanes more efficiently. The workhorse of the system is regular route service, one of the new opportunities to move people is aBRT. Much like the approach on highways, with aBRT we create a faster all day service that mimics the experience of the LRT train and ridership. Easy loading, signal prioritization, easier access for the bus to the loading area and less frequent stops, but more certainty, real time signs. Certainty, reliability, predictability and speed. the right mode in the right corridor we need to focus on.

LJ: You said we need more resources, but the Chamber ["the chamber" is probably where the secret society meets to sacrifice goats or something] said that MN’s business climate is worse than other states. Is there a point where the overall burden becomes so onerous that businesses that can will leave?

CZ: That’s the big question. My personal experience, it really depends on the business. Depends on where they are and where their markets are. [This is very sensical.] The tax burden of the business is not primary. Talent, access to markets, and other factors. It is absolutely a concern, and the Chamber does a good job articulating the burden [LOL]. But I know that doing business in a state where you have an educated workforce and infrastructure that provides an advantage, that’s why businesses thrive here. It’s a balance and we need to keep everything in proportion. When businesses come here, they look at all the costs of doing business, and look at where are the employees gonna be and how will they get to their work. Transit roads do matter. Is there an interchange? Will 610 connect with 94? [It keeps me up at night, that.] That’s a determining factor. It’s a balance.

PB: There is a tipping point about the cost of government. We are on a grand experiment. We can look at states like MN, WI, IN, TX, CA, and IL, and states that have a high burden and those that have a low burden and see what the job creation effects are. It’s a correlation. Its hard to make a causation argument but there’ll be strong correlates we can look at in very short order. [E.g. compare Walker's Wisconsin to Dayton's Minnesota... haha Scott Walker!]

LJ: Traffic congestion has not increased in 6 years. When will we move beyond the obsession with congestion and look at changing demands and how to meet them? ["Obsession with congestion..." Larry Jacobs, you are my hero.]

SZ: Congestion continues to be significant and is related to the economy. [Significant and related are super vague words. That's like saying I have a number of Nobel Prizes, even though that number is zero.] During the recession we had a drop and the experience of commuters was different during that area. I can say there are incredibly significant congestion points during peak hours. If you aren’t driving during peak hours, I drive these corridors all the time and I see congestion as being a really significant issue for people. [NOTE: There are no traffic jams in Flint Michigan] The most important things is its impact on people’s lives. They can be home with their kids, going to soccer, making supper, its makes a difference in people’s lives. There is an increase in people using transit. The percentage of people using transit is growing. VMT to work is not as fast a growth rate as it is in transit. It’s about our changing demographics, and the future. 2/3 or more of our households will be smaller households, and those folks are gonna want smaller housing unites. They will cluster in more dense settings. We’re making our projections for the region and we’re not projecting growth at the outer regions at the same rate as past. Its really a change in how we live, and how we choose to live.